The New York-based firm has started returning money to investors from its
three funds, Satellite Overseas Fund Ltd., Satellite Fund II LP and Satellite
Credit Opportunities Ltd., which together had $2.8 billion, said the person, who
asked not to be named because the information is private.
Lief Rosenblatt, 55, a Satellite founder, didnât respond to a call or an
e-mail seeking comment.

Satellite, which oversaw about $7 billion at the end of 2007, was started 10
years ago by Rosenblatt,
Gabe Nechamkin and
Mark Sonnino, who worked together at Soros Fund Management LP. Satellite in
November halted client withdrawals from its funds, which lost more than 35
percent last year, the person said.

âYou canât suspend redemptions forever,â said
Jeremy Walton, head of fund disputes at law firm
Appleby Global in the Cayman Islands. âIf thereâs no scope for trading out
of positions or creating liquidity to meet redemptions, then funds have little
choice but to shut down.â

The firmâs $1.5 billion Satellite Overseas Fund Ltd., its largest, returned
about 6.7 percent this year through April, said the person. Satellite has about
50 employees, down from about 120 people at the start of last year.

Shut Down

A record 1,471 hedge funds, or 15 percent, of the industry, shut down last
year after managers posted record losses, according to Hedge Fund Research Inc.
Peloton Partners LLP, the London-based firm run by former Goldman Sachs Group
Inc. partners, and Ospraie Management LLC, run by
Dwight Anderson in New York, were among the firms that shut down funds last
year.

Hedge funds, private, largely unregulated pools of capital whose managers can
buy or sell any assets, have returned 4.2 percent this year, according to Hedge
Fund Research.

Investors pulled $103 billion from hedge funds in the first quarter, leaving
the industry with $1.3 trillion, the Chicago- based researcher said. To stem
withdrawals, about 17 percent of funds had restricted redemptions as of March
31, Credit Suisse Group AG said in a report.